Wednesday, February 26, 2014

“You hit the wall, Eric, when problems in the banking system are allowed to manifest themselves -- where some bank finally realizes, ‘Hey, we don’t have any capital here and we just can’t keep going on pretending that we are solvent when we are insolvent.’ And as we see this constant deterioration in the economic data, I think it will become apparent to everyone that things aren’t working.

If stocks start going down, of course it imperils all paper assets, and the banking system owns nothing but paper assets. My biggest concern in the financial arena has always been that the banks end up with problem loans. In Spain something like up to 25% of all loans are problem loans. You just know there is no way for the banks to survive without the support of the central banks, and these central banks are getting extended here. There is only so much they can do.

So you will see something (shocking) in the financial system -- maybe it’s in the stock market, maybe it’s some bank going down. The valuations are bearing no relationship to what the underlying fundamentals are today, so something is going to break somewhere along the line.”

Monday, February 24, 2014

It can’t go on forever because some people do demand delivery of gold. That’s why I look at the delivery side. COMEX inventories have fallen from 11 million ounces (11 Moz) to 7 Moz. Most of the dealer gold that’s owned on the COMEX has already been nominated for. So there’s really no gold held by the dealers anymore. I think the physical market will win out.

We have also seen what’s called the gold forward offered (GOFO) rate. It is negative today, which means there is a tightness in the gold market. That’s only happened five times. It happened in June of this year. It happened in October 2008 after gold had a big decline. It happened in 2001 at the bottom of gold, and it happened in 1998, when we had the World Gold Agreement, and all of a sudden the price of gold shot up. Every time it has happened, gold has been followed by a very large rally.

Saturday, February 22, 2014

Higher interest rates would bring stress on the banking system, which could potentially wreak havoc on stocks.

When it comes to gold, however, I believe the current demand should already have propelled the price higher. Demand is taking gold off the shelves; that is why I am so comfortable sitting on our positions here.

So I do not draw a unique linkage between higher interest rates and gold going up.

Thursday, February 20, 2014

I would be looking for one of three things. First, I would expect to see a blow-off peak -- an irrational buying frenzy – where valuations get to ridiculous levels. Another signal would be that government is displaying some fiscal sanity. Finally, if they made the dollar convertible into gold I would no longer need to own physical gold.

Tuesday, February 18, 2014

Eric Sprott, Chief Executive Officer and Senior Portfolio Manager, of Sprott Asset Management and recent recipient of the Order of Canada provides valuable insight in an interview with Mining MarketWatch Journal, shedding light on various issues including physical supply imbalances, paper market distortions, macro economic fundamentals, and global demand forces in play that will be key drivers in 2014. Eric Sprott also discusses the opportunities setting up for the majority of precious metal equities as gold makes a drive over $2,000/oz and silver over $50/oz.

Eric Sprott on Western central banks to India: "...because you have a fiat currency too, as we do, and we can't have people find out that we have no gold."

Eric Sprott on physical supply imbalance: "Between Hong Kong/China who imports seemingly 120 tonnes per month and India that can certainly support demand of 80 tonnes a month - you've got 200 tonnes a month just in those two countries in a world where mines only supply 185 tonnes a month."

Eric Sprott on how investors in precious metals and related equities will fare: "...the reality is probably 9 out of 10 they will all win because it's all a function of the price of the precious metals here. The precious metal price will I think bail everybody out."

Wednesday, February 12, 2014

“Even when I look back to the US and how we came out of 2008 -- we’ve got an extra 20 million people on food stamps. There are no real signs of real growth here. I just think that people will figure out that we have all been boondoggled on this thing, to believe that something positive is happening, when in fact very, very negative things have been happening.

The Fed’s balance sheet has blown out. We never did restructure the banking system. We see that the European banks would have to raise $1 trillion in certain circumstances. And I can just imagine if they actually came to market (for $1 trillion) what the prices of the bank stocks would do -- they would just collapse because I don’t think there is $1 trillion that wants to go into European bank stocks.

So all of the problems that we had in 2008 are still around, except magnified now. So that’s the big concern -- that we all find out it was just a big Ponzi scheme and the market breaks. It’s the same decision I had to make back in 2000, before the Nasdaq crash, when I thought, ‘Boy, it looks like the Nasdaq is going to crash. What am I going to do?’ The obvious conclusion was you’ve got to own hard assets -- things like gold and silver.”

Monday, February 10, 2014

“I really believe that the decline last year was orchestrated because the (Western) central banks have run out of gold. To think that the US Treasury, which theoretically had 8,000 tons of gold, could only deliver 5 tons to Germany (laughter ensues). The dots you can connect are so obvious that there is no gold there (in US vaults). You would think they could have done a hell of a lot better than that (delivering only 5 tons), but they couldn’t. So I think we will see a lot more spirited buying of GLD, and its impact on the physical market could be very dramatic.”

Saturday, February 8, 2014

“If you have any contrarian in your spirit at all, this (gold) is the most contrary bet you can ever make. It would be most surprising as the year unfolds if we get buying in the (ETF) GLD.

Imagine for one second that instead of getting 900 tons (of gold) coming out of ETFs, we had 900 tons go into ETFs. That would be a dynamic 1,800 ton change, when we (only) mine something like 2,100 or 2,200 tons a year, ex-China, ex-Russia. That in itself would almost consume the year’s mine supply, let alone that China is going to buy more than the (entire) year’s mine supply based on the trends that we’ve experienced already.

I just think gold is threatening to blowout (to the upside), and I think when it does there will be lots of guys wanting to put money in. Then, of course, GLD will be forced to go out and buy some gold.”

Saturday, February 1, 2014

Investors who are dumping gold have short memories. Gold is a very wanted commodity – so wanted that India had to stop its people from buying it.

Analysts like to say there is no interest in gold. There may be none in the Western world because the Western banks are the ones who promulgate this nonsense that gold is not the appropriate asset to have. We will wait to see what happens for the next few years – gold versus the stock market. The beauty of a stock market is that it can go on for a long time while being completely wrong.

For instance, we will probably end this quarter up just 1 percent. Every year, the market believes that we will see a recovery. Every year, they end up disappointed. How much longer will the market believe a recovery is around the corner?